HONG KONG SAR, CHINA Law and Practice Contributed by: Pang Lee, Joyce Wang, Mark Liang and Francis Li, Cooley
However, the SFC does impose additional require- ments specific to the technological medium. Manag- ers and distributors of tokenised assets must conduct rigorous technical due diligence on the underlying smart contracts, assess the cybersecurity resilience of the chosen blockchain network, and implement robust private key management and contingency protocols that go beyond standard traditional securities opera- tions. This ensures that while the economic regula- tion remains consistent with traditional markets, the unique technological risks inherent to DLT are effec- tively mitigated. Furthermore, expanding on this framework, the SFC issued the “Circular on secondary trading of tokenised SFC-authorised investment products” on 20 April 2026, which sets out the requirements for allowing the secondary market trading of these tokenised products by the retail public in Hong Kong. To ensure market scalability and investor protection, this circular mandates that subscriptions and redemptions must account for liquidity risk management tools and for- ward pricing considerations. It also introduces the role of “connecting brokers” – entities tasked with direct- ing clients’ secondary trading orders to SFC-licensed VATPs – and requires robust contingency plans to manage potential trading halts in the secondary mar- ket if primary dealing is suspended.
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